While Sergei and Larry swear they are not going to let perception change their business strategy, anybody in my business understands that perception is reality. While it may be ignored in the short term, as time passes Google is going to have to deal with their damaged reputation outside of China.

Inside of China, meanwhile, Google is being taken to the cleaners by Baidu.

Despite significant investments in China and recruiting some of the country’s best and brightest, at some point in the future Google will need to dispassionately review what it is costing them to do business here in reputation and greenbacks, and what it is earning them in market share and real business.

I still think that reckoning is coming later this year, and despite Google’s protests to the contrary, such a public admission on the part of its founders suggests they are already on the path.